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From Adviser Guide:

40min

Q: What should I ask a potential buyer?

Client care should be at the forefront of your mind.

Many clients will have become your friends over the years and you should want to ensure you are selecting the right firm to take over the relationship.

Alan Hudson, chairman and chief executive of discretionary wealth manager and IFA AFH Financial Group plc, said most advisers will be interested in the service proposition of the new practice and how they intend to integrate your clients into their business model.

You should also be interested in the financial status of the firm looking to buy your business.

Questions you could ask include:

1) What is the structure of the deal and over what period will this be paid?

2) How is the consideration price calculated?

3) How will the acquirer raise the capital to fund the acquisition?

4) Can you put me in touch with the principle of a recently purchased practice and one purchased several years ago?

It is also important to fully understand the ownership of any potential buyer. Questions to tackle this issue include:

1) Who are the owners of the business? i.e. is it owned in part by private equity. In this case, Mr Hudson said you should be wary of their exit strategy, which may well be short term.

2) Is the business going to remain independent?

3) Is the business part or wholly owned by an insurance company or network?

Depending on how the purchaser plans to pay you for your firm, a vital question could be: how can I be sure you will be around for the deferred consideration? Mr Hudson said it is important to check the financial strength of the acquirer.

As usually price is really the main item to address it makes sense to get to the point on this subject matter as quickly as possible to avoid wasting time, according to Phil Young, managing director of Threesixty Services.

As all deals were paid out over a number of years, Mr Young agreed with Mr Hudson that it is vital to ensure that the buyer is financially viable enough to continue to pay out over that period.

If you want to continue to work, Mr Young said you would need to discuss how this would work and what will happen to staff, premises, etc.

He said: “You need to be comfortable you could continue to work for the buyers business.”

If you just want to walk away as soon as possible, Mr Young said this was often acceptable to the buyer subject to an agreed hand over period.

It is often advisable to ask about other transactions the buyer has completed and what their process looks like to get an idea of their experience in this, he said.